Seeking Alpha

Forget Dr. Copper (which hasn't been a relevant moniker since Rickey Henderson played for the...

Forget Dr. Copper (which hasn't been a relevant moniker since Rickey Henderson played for the Yanks), it's iron ore which is the far better economic bellwether, and its price is collapsing. (see also)
Comments (33)
  • Ohhh everybody's looking at iron ore now. That's real nice.
    22 Aug 2012, 09:00 AM Reply Like
  • lol. Read your iron ore posts before.
    22 Aug 2012, 01:32 PM Reply Like
  • ahhhh an economic bellweather exactly as I was saying which means inversely if the world economy improves then IO will improve.
    22 Aug 2012, 10:24 AM Reply Like
  • iron ore is marching to a different drum, the economic transition in China. China is still growing, it's just not growing in areas that are as steel-intensive as they were in the past.
    22 Aug 2012, 10:28 AM Reply Like
  • You're double speaking. In your article you acted like IO was in a world wide secular downturn and here you're acting like it's because of an economic transition in China (which its not).....So which is it?
    22 Aug 2012, 10:34 AM Reply Like
  • The economic transition in China provokes the worldwide secular downturn. China was the reason there was an iron ore boom to begin with. Check prices going back 10-12 years and you'll understand this.

     

    China now has almost half of the world's steel production capacity. Where China goes, so goes steel and iron ore (and a lot of other stuff).
    22 Aug 2012, 10:37 AM Reply Like
  • I say again thats what makes a market because the only reason China is in an "economic transition" is because of a worldwide recession. When and if (a big if) Europe pulls itself out of its recession China will go back to being the manufacturing capital of the world (no transition required) a very steel intensive industry. We are simply in an IO demand trough......I'm sure people have said its different this time many times but I assure you it is not different.

     

    Add to that the emergence of India as its own manufacturing powerhouse in the next few years and the infrastructure required there will see higher IO demand and prices.
    22 Aug 2012, 10:42 AM Reply Like
  • India is irrelevant when it comes to steel.

     

    And making consumer products also won't save this situation, what's happening is not really about Europe. I was able to predict it based on internal dynamics in China, not due to Europe.
    22 Aug 2012, 10:44 AM Reply Like
  • And the US is irrevelant to Steel too, well now we are! We used to be #1! BRIC's leave out other major Frontier Markets such as Africa, Middle East, Eastern Europe etc. The future demand will come from these markets among the existing Emerging economies such as BRIC. Then add to the fact that the US and other developed economies have not updated their infrastructure for a generation and we can see demand will always be their.
    22 Aug 2012, 11:24 AM Reply Like
  • Steel can drop like a rock with demand still being there.
    22 Aug 2012, 11:25 AM Reply Like
  • India is currently irrelevant. The fact that you dismiss them as a global economy requiring a massive infrastructure build (ala China in the 80s) going forward is flawed.

     

    Internal dynamics? Which ones oh let me guess electricity production and the 3-4 others talking heads repeatedly mention in the hard landing argument that are talked about on cnbc? Doesn't take a PHd in economics to repeat what you hear on TV.
    22 Aug 2012, 11:00 AM Reply Like
  • None of those. The residential market, and what was about to happen and is now happening, namely housing starts plunging. I didn't start saying this today - I started back in March or so.

     

    India is irrelevant and might well stay irrelevant, China is many times more advanced than India in the process, it's not a certainty that India will ever do the same, while it doesn't turn more capitalistic and open.
    22 Aug 2012, 11:04 AM Reply Like
  • Paulo is short Vale and other produces. Please disclose your positions otherwise your article and comments should be viewed with an intense bias!!!!!!!!!!!!!!!!!!...
    22 Aug 2012, 11:25 AM Reply Like
  • I'm actually happy to hear he's short Vale at least he's man enough to take a position he believe in. But you're right he should disclose it at least in the articles.
    22 Aug 2012, 11:34 AM Reply Like
  • I am not short any of the producers. I am short AUD/USD.

     

    The only intense bias I see here is by those people that are defending the stocks because they're long ...
    22 Aug 2012, 11:45 AM Reply Like
  • If I was short the producers, it would obviously be disclosed in the articles.
    22 Aug 2012, 11:45 AM Reply Like
  • Lets hope Cramer is right about VALE :)
    Time will tell.
    22 Aug 2012, 09:02 PM Reply Like
  • BHP and RIO have potential room to the downside here, looking at the charts. VALE is oversold, and could stay that way or get even cheaper.
    22 Aug 2012, 12:18 PM Reply Like
  • Look like iron ore is just another indicator of more looming worldwide economic weakness.
    22 Aug 2012, 12:40 PM Reply Like
  • It's a bit more specific. Though obviously it does transmit a little weakness.

     

    China is growing all the same.
    22 Aug 2012, 12:44 PM Reply Like
  • For the long-wrong bears, there's always some new belwether. No, it's not copper, it's iron ore. No, it's aluminum. No, it's grains. No, pork bellies.

     

    I hear sunspot activity is picking up, too.
    22 Aug 2012, 12:49 PM Reply Like
  • Well, then let's speculate something, say, a micro-cap that's promising to protect satellites or something ... eheh.
    22 Aug 2012, 12:52 PM Reply Like
  • China's current steel production capacity is close to 900 Mt a year.

     

    The US peak steel production was 140 Mt a year in 1969.

     

    Unlike oil, every piece of iron ore that was consumed in the steel making process still exits and can be recycled.

     

    Right now, Chinese steel makers are facing increasing losses, but they keep producing anyway due to political reasons. Despite that, iron ore price is dropping like a rock even with Chinese steel production still high.

     

    Now imagine that Chinese have had it finally enough and shut down a significant portion of their steel (over)capacities, what will happen to iron ore price?
    23 Aug 2012, 03:16 AM Reply Like
  • haha you'd be right except their infrastructure plans are less than 30% completed so no, nice idea, but their need for steel will continue for quite some time. Have you ever been to China? They are building factories as they build their highways toward the western part of the country.
    23 Aug 2012, 09:56 AM Reply Like
  • RSI, building infrastructure does not necessarily guarantee higher steel demand. If they build 30000 km of something in one year, and 24000 the next, the network is still increasing in size, yet, 20% less materials are needed from one year to the next. This is a problem with capacity sellers.
    23 Aug 2012, 10:01 AM Reply Like
  • Paulo while I agree with everything you just said, in theory. I was simply responding to the ridiculous comment of Chinese demand drying up suddenly by noting that the demand remains strong especially in a regime that has a "complete their 5 year plan at all costs" mentality.
    23 Aug 2012, 12:43 PM Reply Like
  • What dividend growth said was not ridiculous - he was talking about a scenario where steel makers are still forging ahead with production while there is some slow down in steel demand (this if official stats are to be believed). This might be followed by a steel destocking move where steel production goes lower than steel demand - and that would provoke an ever steeper drop in the iron ore price.

     

    This could happen even without Chinese demand (for steel) drying up.

     

    (RSI you should jump out of that position and thank the Gods that the stocks didn't implode right away giving you a chance to drop them before they reflected what's going on in the iron ore spot market - I mean this)
    23 Aug 2012, 12:46 PM Reply Like
  • Ok fair enough although not one conference call in the previous quarter of any miner noted this happening, and yes it was after the much deeper IO price drop in Sept 11. So this is a possible scenario to obviously look out for but not guaranteed.

     

    I might also note that while I hate to see the miners betting the farm on Chinese stimulus the majority of them do believe a infrastructure stimulus package is in the works which will temporarily make these other worries moot, and make the miners great short term trades.
    23 Aug 2012, 12:54 PM Reply Like
  • This is being bandied about regarding the steel production data from early August - no way it could be in the earnings conferences.

     

    A China stimulus package could help the shares temporarily, but it's probably unlikely to turn the iron market around for long unless it was freaking huge.
    23 Aug 2012, 12:57 PM Reply Like
  • The Chinese demand for commodities IS DRYING UP as we speak.

     

    Coal, cement, iron ore, steel prices are ALL in free fall.

     

    Inventories of these commodities are piling up to the sky everywhere.

     

    You have never been to those places in China so please stop dreaming about imaginary Chinese demand.

     

    And never, ever trust Chinese official economic statistics because you COULDN't possibly imagine how they were made.
    25 Aug 2012, 10:26 AM Reply Like
  • See how dumb you sound when you have no idea what you're talking about? I've been to China twice a year for the past four years visiting for work. My last trip was recently cancelled because of protests in Sichuan province.
    25 Aug 2012, 01:20 PM Reply Like
  • RSI, but still what dividend_growth said is true - all those prices are imploding. Not exacly because of demand drying up, but still the prices are imploding.
    25 Aug 2012, 02:54 PM Reply Like
  • Shanghai A-shares made another post 2009 low. Cement, Coal, Real estate shares are cratering.

     

    The fact that you have been to China for some time and still don't have a clue shows that you are really hopeless.
    27 Aug 2012, 04:21 AM Reply Like
DJIA (DIA) S&P 500 (SPY)